Knowledge stocks, government R&D, institutional factors and innovation: evidence from biotechnology patent data

Employing panel data from 36 countries, this study examines whether diverse factors such as existing knowledge stock, research and development (R&D) financed by government, R&D performed by government, education and economic freedom have influenced biotechnology innovation. The results indicate that existing knowledge stock is a driver of biotechnology innovation, reflecting potential positive path dependencies. This study also suggests the possibility that as the share of government R&D financed in total R&D expenditure increased, the performance of biotechnology innovation increased. However, in developed countries, an excessive rate of government R&D performed in total R&D expenditure could have negative innovation effects while higher education and economic freedom had a positive impact on the biotechnology innovation. We propose that, in developed countries, the government needs to play a role as a market facilitator for the promotion of biotechnology innovation. Developing countries need a stronger government role for the promotion of biotechnology innovation in terms of R&D investment.